Case Study 1

Company owner approves tiered sale – a long-term win-win for family, management and employees.

We implemented a two tranche transaction for Gordon Incorporated -- 55% sold to an ESOP and 45% sold back to company treasury. Simultaneous with the ESOP, we created an MSOP (management stock ownership plan) which moved $10+ millions in stock to succession management. ESOP employees pay nothing for their stock and, in the long run, management becomes majority stockholders. The ESOP does start with majority share but their stock is redeemed by the treasury as they retire or otherwise terminate employment. Eventually, within a 5-6 year period, after the 45% party sells the second tranche, the MSOP moves 22% of ownership to succession management or family -- without gift or income tax. Effectively, we created a management buyout without the management, employees or succession family paying a penny for it. A neat win-win.

Case Study 2

Construction company owner initiates an acquisition strategy as sons take over.

Hand Construction, Inc. had high level growth. With his sons groomed to take over the business, the owner wanted to ensure the future through acquisition. His goal was to concentrate on business development, as his sons and other management members operated the day-to-day. We created an ESOP that reduced the cost of debt financing by 66.7%, by reducing the profits to pay principal. We advised the owner: with an ESOP, $10MM of debt only takes $10MM of profits to repay that debt; but without it, at a 40% income tax rate, he would need $16,700,000 of pretax profits to pay back that borrowed $10MM principal. A no-brainer.

Case Study 3

Explosive products manufacturer creates a dynamite succession and exit strategy.

Our goal was to create an exit transaction, at full fair market value, for the founder of Baker Risk and Engineering Consultants. The solution was a stock incentive plan for generation one management and also for the next generation of management, plus the creation of a 100% tax free, employee owned Sub-S company that competes worldwide, designing and consulting in the manufacture of explosive products. We helped procure the transaction financing through the company’s current bank. The owner perpetuates his company. And plans his exit.

Case Study 4

Electrical Contractor firm approves the sale a majority value of the company to an ESOP, through a strategy that maintains majority (51%)control of the Stock.

CTC was able to design a transaction that gave an ESOP Trust 49% of voting shares, without giving up majority vote. This strategy was possible by revoking a Sub-S election in favor of a C-Corp that converted the owners's 49% share to a different class of Preferred Stock. Basically one (1) share of Preferred converted to 1.27 shares of common. The desired outcome? The minority owner kept majority control and the ESOP Trust bought 55% of value with only 49% of the vote. In concert, we also structured a Management Stock Ownership Plan(MSOP) to provide family or management a succession avenue, to eventually own majority of the stock over a 10-15 year period. As employees retire or terminate employment, the company buys the shares into the company treasury to prevent them from being repeatedly recycled in the ESOP Trust. This C-corp ESOP also allowed the company to operate tax free while debt remains and uses ESOP contributions to come back as loan payments.

Case Study 5

Large, private mortgage company facing crisis brought on by large mortgage future calls, cash reserve constraints and housing market uncertainty, adopts a growth strategy.

In the midst of multiple economic challenges that screamed for protective strategies, this company made a brave decision that expansion would strengthen its future. But they needed help to secure temporary financing and to free up capital for long term stability. Before CTC engagement, the company took on a large geographic expansion. In the middle of the crisis, we proposed lending sources to keep the business alive. In a relatively short time, due to a period of interest rate reductions, the company expanded its geographic market area. As the the company was able to triple its enterprise value, we structured a plan to sell 35% of the company to an ESOP for more than double what a previous 55% ESOP might have obtained. A key part of this work was to create a three tiered MSOP to provide stock incentives that in 10-15 years would own the majority of the company and offer significant tax advantages to them and their heirs.